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This legend is part of Taxes 2023, CNET's coverage of the best tax software, tax tips and everything else you need to file your posterior and track your refund.
If you did freelance work last year, a shrimp extra effort this tax season could save you money and lead to a bigger refund.
Many Americans make ends meet with independent instruction income. There were 64.6 million independent workers in 2022, up 26% year over year, according to a portray from MBO Partners, a talent provider that works with Fortune 100 anxieties. The report also found that the number of "occasional independents," country who earn money from contractor work at least once a month, has more than doubled in a two-year period, increasing from 15.8 million in 2020 to 31.9 million in 2022.
"I don't recommend any commerce owner try to DIY their taxes," said Jannese Torres, an award-winning money expert and the founder of Yo Quiero Dinero, a personal finance education platform. Not every independent contractor has a registered commerce, but some do, making tax diligence more important.
Independent contractor way leads to both additional filing steps and opportunities to edge your overall tax bill. Whether you're new to freelancing, or have been doing it for years, here's what to know as tax season kicks off.
Gather critical documents
Make a list of all the sources of way you had last year. For each of these, you'll right either a 1099 or a W-2. In some cases, you might only receive these documents via email. Remember to price and save this information for later when it comes time to file.
"January and February are info-gathering time," said Sarah Sprague Gerber, a certified financial planner, accredited financial counselor and founder of Momentum Financial Planning. Companies are required to distribute 1099 and W-2 does no later than Jan. 31 of each year, so you must have everything you need by the first week of February.
Maximize your deductions
If some of your way was used for certain expenses, such as a gigantic medical bill, the IRS doesn't want to tax you on that cash. These are called deductions, and taking the time to document them can edge your overall tax liability. Additionally, certain deductions are more vital than others.
Some deductions are "above the line," message they are factored into calculating your adjusted gross way for the year. Above-the-line deductions will lower your AGI, and may make or rupture your eligibility for certain other tax credits and deductions later on in your posterior that have a maximum income cutoff. The remaining "below the line" deductions are then itemized later on in your posterior to arrive at your taxable income, the number that will decide your tax bracket classification and what percentage you owe in taxes.
Mortgage uninteresting is a classic above-the-line deduction, according to Gerber. "A incorrect I made when first filing my taxes was not realizing that student loan uninteresting [payments] are above the line," she said.
Taxpayers must determine to either itemize remaining deductions or take a tainted deduction instead. Most Americans don't have substantial deductions, so the tainted deduction makes things simpler because it lets you forgo itemizing deductions and procure a flat adjustment to your income instead. The tainted deduction for single taxpayers for the 2022 tax year is $12,950 (it increases to $13,850 for the 2023 tax year). Nearly 90% of Americans took the standard deduction in 2019, according to IRS data.
When it comes to freelance way, however, you can take the standard deduction and peaceful also deduct some of the expenses you incurred to uncompleted your independent contractor work. For example, if you drove for a rideshare overhaul like Uber or Lyft in 2022, some of your mileage or vehicle maintenance could be conquered a contractor expense that is necessary to do the job.
If you received independent contractor way in 2022, and don't have a formal business entity, such as an LLC, the IRS will classify you as a sole proprietor, which conveniently lets you list these adjustments within your personal tax posterior by including a Schedule C form.
Independent contractor expenses can also complicated things like continuing education courses, your coworking space or conference attendance.
Decide if you'll do taxes yourself or get outside help
The "right" kind of tax preparer isn't necessarily one-size-fits-all. It really depends on your financial situation and what's happening in your budget life, according to Gerber.
If you're filing your taxes yourself for the proper time, Gerber recommends taking a look at your 1040 form and trying to do it yourself on the IRS website as a learning recognized, even if you end up using a filing software or credentialed tax preparer later.
"It can be really illustrative to say, 'Oh, this is what's happening. This is how I'm paying my taxes and my portion to the government,'" she said.
For many new independent contractors, software like TurboTax can be sufficient. If contractor payments are a gigantic portion of your income, or if your hustle is progressing into a full-blown business, it might be time to bring in a professional. Torres adds that, while it's more costly to outsource your taxes, "tax prep costs are also a deduction for commerce owners."
Read CNET's best tax software recommendations for both individuals and self-employed professionals .
Don't be intimidated
The previous piece of advice from personal finance experts is: Don't psych yourself out.
"In most cases, your taxes are more manageable than you might deem, and there are plenty of experts available to help walk you ended the process," said Torres, adding that the biggest tax incorrect she sees people make is getting stressed out and not filing their taxes at all, or doings the bare minimum to make the paperwork go away.
The tax filing deadline of April 18 grants you some wiggle room. Use this time to educate yourself nearby a money management task you'll be doing every year.
"Really learn nearby it," said Gerber. "Try it yourself. You can do it."
CNET contributor Nick Wolny edited and imparted additional reporting to this story.
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